By Hal M. Bundrick
NEW YORK (MainStreet) The media and entertainment industry is expected to outperform the major stock market indices in 2013, according to a new report just released by Ernst & Young. Overall revenue and earnings have continued to improve in the entertainment industry, while less-glamorous businesses are still struggling to recover. EY says cable operators will likely be the most lucrative showbiz segment with a 41% profit margin.
The report compares overall media and entertainment business performance to major stock market indices, as well as ranks 10 showbiz industry sectors on their profitability and growth rate.
Interactive media is expected to see earnings growth of 22%. Meanwhile, film and television production costs are falling, as studios distribute fewer releases in favor of streaming, resulting in an 11% return.
The 10 sectors of the media and entertainment industry measured by EY are expected to produce a 2013 profit margin of 26%, compared to the S&P 500's expected annual return this year of 24%. It is the first time in five years that the entertainment industry as a whole will outperform the major stock market benchmarks.
"Media and entertainment companies are maintaining and growing their businesses primarily by growing their digital revenues and scaling back overhead associated with traditional media," says John Nendick, Global Media and Entertainment Leader at EY. "In emerging markets, increases in advertising, as well as rising incomes and media consumption, have also helped drive revenue and fuel long-term growth as consumers in mature markets continue to migrate toward digital."